Suspect that the U.S. is home to a great many nonprofit organizations? You don’t know how right you are. As of April 2016, the Nonprofit Center for Charitable Statistics reported that there are 1,571,056 tax-exempt organizations, including 1,097,689 public charities; 105,030 private foundations; and 368,337 other types of nonprofit organizations (nccs.urban.org/index.cfm). In 2010, nonprofits accounted for 9.2% of all wages and salaries paid in the U.S., and in 2014, the nonprofit share of the Gross Domestic Product (GDP) was 5.3%.
Nonprofits are important in the aggregate, but what does this mean on a more local—and personal—level? When we attend school, enjoy leisure activities or cultural enrichment, worship, receive medical services, or do volunteer or even paid work, in most—if not all—of these instances, we’re interacting with nonprofit organizations. It’s hardly surprising, then, that we’re inclined to say “Yes” when we’re invited to join the board of a nonprofit—even before we know exactly what serving on a board will actually entail. What is this thing they call “governance” or “leadership”?
Many nonprofits ask themselves the same question. The reasons for asking vary, but typically involve people, personalities, and financial resources (or the lack thereof). In one scenario, the board has relied on the leadership of an effective and charismatic founding executive director who is now preparing to retire. In another organization, the executive director and the board chair have competing ideas about what leadership should look like. Social or economic changes that pressure the organization to raise more money, change direction, or perhaps even close its doors present challenges that the board and executive director feel ill-equipped to address.
To ensure the legal, ethical, and financial health of the organization, the nonprofit executive director, board chair, and board members must engage with a range of often complex issues, including these:
- Establishing or clarifying the organization’s mission, vision, and values
- Formulating a sound strategic plan
- Conducting an organizational assessment
- Managing an executive transition
- Recruiting and compensating a new executive director
- Evaluating board member and executive director performance
- Evaluating board structure, policy, and practice (including board recruitment)
- Growing and strengthening the development (fundraising) function
- Evaluating new programmatic, partnership, and funding opportunities
- Maintaining the balance of power between these stakeholders
This can be a daunting roster of responsibilities, particularly when you consider that the majority of board members are unpaid volunteers who may be entirely new to board service of any kind—or they may possess an entrenched view of how the nonprofit should operate.
Whether working with novice or deeply experienced board members, the executive director and board chair have re course to a constellation of board leadership and governance resources. Many of these resources are free; others require membership (often in organizations it makes sense for the nonprofit to join) in order to access resources; while others sell information products or offer consulting resources on a fee-for-service basis. More often than not, these organizations offer a mix of free and fee-based goods and services.
The Internal Revenue Service (IRS) determines nonprofit, tax-exempt status in the U.S. The agency’s Charities & Nonprofits webpage (irs.gov/Charities-&-Non-Profits) provides links to official guidance documents, educational and training resources, and statistics on tax-exempt organizations. The majority of tax-exempt organizations are required to file annual Form 990 returns, a good source of information about the organization’s financial health, programmatic activity, executive compensation, and major sources of revenue.
While much of this information may also be available on the nonprofits’ own websites (look for links to the organizations’ recent 990 filings and annual reports), a free, one-stop online tool for locating 990s is the Foundation Center’s 990 Finder (foundationcenter.org/findfunders/990finder). This site also offers assistance in deciphering the various types of 990 filings.
The National Center for Charitable Statistics bills itself as the national clearinghouse for data on the nonprofit sector in the U.S. The Center publishes a variety of summaries, top 10 lists (e.g., Largest Public Charities by expenses, total assets, and net assets), and research reports, including one titled “The State of Nonprofit Governance” (September 2014).
Leadership Best Practices Resources
Best practices. Recommended practices. Guidelines. They can be a rich resource for a solidly performing organization, or a lifeline for a nonprofit dealing with governance, leadership, financial, or other types of crises. Nonprofit leaders and managers have several types and sources of best practices from which to choose.
BoardSource (boardsource.org) is a membership organization specializing in board governance best practices and leadership development. BoardSource hosts an annual leadership forum, hosts a LinkedIn group, and provides customized training. It publishes books, toolkits, and workbooks on all aspects of leadership, including bylaws development and understanding the role of the board in nonprofit governance. Its book, Ten Basic Responsibilities of Nonprofit Boards ($44), is a frequently cited resource. Content is available to members only. Dues are $199 (1 year) or $349 (2 years) for individuals/consultants and range from $500 to $2,500 for organizations, depending on their annual budget size.
Independent Sector (independentsector.org) describes itself as “the leadership network for nonprofits, foundations, and corporations committed to advancing the common good.” Independent Sector recommends that its Principles for Good Governance and Ethical Practice (2007, updated in 2015) “should be considered by every charitable organization as a guide for strengthening its effectiveness and accountability.” A summary of the 33 principles is available as a free download.
The Standards for Excellence Institute (standardsforexcellence.org) publishes “Standards for Excellence: An Ethics and Accountability Code for the Nonprofit Sector,” which it promotes nationwide (several individual U.S. states have adopted these standards for statewide use). The code provides benchmarks and measures across a range of nonprofit governance and management topic areas. Nonprofits can opt to go through the certification process or may simply choose to purchase the Standards for Excellence Codebook ($10) and the Board Excellence Handbook ($40) for their own organizational assessment process. The Institute also offers the code as a free app.